RTTNews - U.K. manufacturing output unexpectedly dropped in May, indicating that firms are still facing difficulty in functioning in the face of the ongoing crisis.

Manufacturing production fell 0.5% month-on-month in May, data released by the Office for National Statistics showed Tuesday, defying expectations for a 0.2% growth. Meanwhile, the statistical agency revised April's figures to show a stagnation from 0.2% growth originally reported. On an annual basis, manufacturing output fell 12.7%.

Output decreased in eight of the thirteen sub-sectors and increased in five. The most significant decreases in output were the 2% in the paper, printing and publishing industries and 1.7% in the machinery and equipment industries. At the same time, the most significant increase of 3.7% was seen in other manufacturing industries.

Earlier in the day, the British Chambers of Commerce said its quarterly economic survey revealed that confidence in the manufacturing sector rose in the second quarter after sharp falls in the previous two quarters, indicating that the worst of the recession is over. But the business lobby said it is too early to talk about economic recovery.

The BCC survey revealed that compared to the services sector, conditions in the manufacturing sector showed notable improvement in the second quarter, though the overall situation in the sector remained worse.

Similarly, industrial production, a broader measure, fell 0.6% in May from April, while it was expected to rise 0.2%. Compared to the same month of the previous year, output fell 11.9%.

The fall in production strengthens chances for a further contraction in British economic activity in the second quarter of the year. Last week, revised figures from the Office for National Statistics showed that U.K.'s gross domestic product or GDP fell 2.4% in the first quarter from the fourth quarter of 2008, more than the initial estimate of a 1.9% drop. The BCC today said GDP probably fell between 0.1% and 0.4% in the second quarter and it is expected to post no growth until the end of this year.

The Bank of England is set to review its monetary policy on Thursday. Most economists expect the central bank to hold its benchmark rate at 0.50%. But, their opinion remains divided regarding an expansion in the central bank's asset purchase scheme to GBP 150 billion from the current GBP 125 billion.

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